-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J5MAYqzHxIYJY9S8NdGbuEnj55x0Kc9YwXOOg47JpMHvicgyTdw0Sqi+EW37ljKT 2Mte0ZM3GDEpgQSvbCNRvQ== 0000950152-04-008959.txt : 20041214 0000950152-04-008959.hdr.sgml : 20041214 20041214170805 ACCESSION NUMBER: 0000950152-04-008959 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041208 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Cost Associated with Exit or Disposal Activities ITEM INFORMATION: Material Impairments ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041214 DATE AS OF CHANGE: 20041214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL HEALTH INC CENTRAL INDEX KEY: 0000721371 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 310958666 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11373 FILM NUMBER: 041202317 BUSINESS ADDRESS: STREET 1: 7000 CARDINAL PLACE CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147573033 MAIL ADDRESS: STREET 1: 7000 CARDINAL PLACE CITY: DUBLIN STATE: OH ZIP: 43017 FORMER COMPANY: FORMER CONFORMED NAME: CARDINAL DISTRIBUTION INC DATE OF NAME CHANGE: 19920703 8-K 1 l10986ae8vk.txt CARDINAL HEALTH, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 8, 2004 CARDINAL HEALTH, INC. (Exact Name of Registrant as Specified in its Charter) OHIO (State or Other Jurisdiction of Incorporation) 1-11373 31-0958666 (Commission File Number) (IRS Employer Identification Number) 7000 CARDINAL PLACE, DUBLIN, OHIO 43017 (Address of Principal Executive Offices, Including Zip Code) (614) 757-5000 (Registrant's Telephone Number, Including Area Code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On December 8, 2004, the shareholders of Cardinal Health, Inc. (the "Company") approved amendments to the Company's Performance-Based Incentive Compensation Plan (the "Performance-Based Plan"). The amendments include an increase in the maximum award payable to any individual for any single fiscal year under the Performance-Based Plan to $7.5 million from the prior $3.0 million limit. Other amendments include expanding the potential performance measures that performance goals under the Performance-Based Plan may be based upon and changing the name of the plan to the "Cardinal Health, Inc. Management Incentive Plan." Also on December 8, 2004, the Board of Directors of the Company approved the amendment and restatement of the Company's Deferred Compensation Plan to be effective January 1, 2005. The amendments reflect the consolidation of the Company's Directors Deferred Compensation Plan with and into the Deferred Compensation Plan for Company executives and to address changes required of nonqualified deferred compensation plans by new Section 409A of the Internal Revenue Code of 1986, as amended, enacted as part of the American Jobs Creation Act of 2004 ("AJCA"). Changes to the Deferred Compensation Plan include (i) restrictions on the time when compensation deferral elections may be made, (ii) immediate vesting for Company matching contributions made after January 1, 2005, (iii) distribution options must be elected at enrollment, (iv) changes in the distribution option elected will not be effective for at least 12 months and cannot result in any acceleration of payments to be made, (v) distributions will not commence for at least six months after termination of employment, and (vi) withdrawals will now be permitted for unforeseeable financial emergencies in accordance with the provisions of AJCA. ITEM 2.05 COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES As previously announced, the Company has launched a restructuring program with a goal of increasing the value the Company provides its customers through better integration of existing businesses and improved efficiency from a more disciplined approach to procurement and resource allocation. The Company expects the program to be completed over a three-year period and to generate cost savings in the fiscal year ending June 30, 2005 and beyond and position the Company for future growth. The Company expects the program to be implemented in two phases. The first phase of the program ("Phase I") will focus on business consolidations and process improvements, including rationalizing approximately 25 of the Company's facilities worldwide, reducing the Company's approximately 58,000 global workforce by approximately 4,200 employees, and rationalizing and discontinuing overlapping and under-performing product lines. The Company expects the second phase of the program ("Phase II") will focus on longer term integration to help generate future revenue growth and create greater productivity, including a focus on: o Company-wide, world-class shared services for administrative functions such as finance, human resources and information technology. o Strategic sourcing to better leverage the Company's global scale and purchasing power. o An integrated go-to-market strategy for the Company's hospital and pharmaceutical manufacturer customers. o Efficiency and quality improvements across the Company's manufacturing and logistics operations. On December 10, 2004, the Board of Directors of the Company authorized the Company to incur certain costs in connection with Phase I. These costs include non-cash asset impairment charges primarily for facility closures, reductions in value of operating assets and the exiting of certain product - 2- lines. Such impairment charges will be recognized as incurred and reflected in the Company's statement of earnings as either a component of selling, general and administrative expenses or interest expense and other or as a special item depending on the nature of the specific charge. Excluding the previously- approved $19 million in costs discussed below, the total costs associated with Phase I are expected to be approximately $300 to $350 million, with approximately $226 to $263 million of such costs expected to be incurred in fiscal 2005, approximately $42 to $49 million in fiscal 2006, and the remainder beyond fiscal 2006. Approximately $123 to $143 million of the total costs for Phase I are expected to result in future cash expenditures. Aggregate costs of approximately $174 to $203 million, $88 to $103 million and $27 to $31 million are expected to be incurred during Phase I in the Company's Pharmaceutical Technologies and Services, Medical Products and Services, and Pharmaceutical Distribution and Provider Services business segments, respectively, as well as approximately $11 to $13 million of costs expected to be incurred at the Company's corporate level. The major types of costs associated with Phase I are expected to be as follows: Employee-Related Costs $65 to $75 million Restructuring-Related Asset Impairment $108 to $126 million Non-Restructuring-Related Asset Impairment $69 to $81 million Exit and Other Costs $58 to $68 million The costs discussed above are in addition to the previously approved costs of approximately $19 million relating to certain restructuring activities in the Company's Pharmaceutical Technologies and Services segment, as disclosed in a Form 8-K filed by the Company on September 27, 2004. Phase II of the program remains subject to approval by the Company's Board of Directors. At this time, the Company is unable to estimate the expected costs for Phase II. The Company expects to provide greater detail for these costs when Phase II is approved by the Company's Board of Directors. As a result of the acquisition of ALARIS Medical Systems, Inc. ("ALARIS") completed in July 2004, the Company expanded its former Automation and Information Services business segment to include ALARIS among other business units, and subsequently renamed this business segment "Clinical Technologies and Services." Costs associated with the integration of business units included within this segment will be recorded as merger-related charges when the underlying expenses are incurred. The Company expects to complete its estimation of costs to be incurred with this integration by the end of the second quarter of fiscal 2005. Portions of this Form 8-K include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these risks, uncertainties and other factors are described in the Company's Form 10-K for the fiscal year ended June 30, 2004 (including in the section titled "Risk Factors That May Affect Future Results" within "Item 1: Business") and in Exhibit 99.01 to that Form 10-K and include (but not limited to) the costs, difficulties, and uncertainties related to the integration of acquired businesses, the loss of one or more key dustomer or supplier relationships or changes to the terms of those relationships, changes in distribution patterns or reimbursement rates for health-care products and/or services, the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal and adminstrative proceedings, the effects, timing or success of restructuring programs or plans, the impact of previously announced restatements, and general economic and market conditions. Except to the limited extent required by applicable law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. ITEM 2.06 MATERIAL IMPAIRMENTS See the information in Item 2.05 above, which is incorporated herein by reference. -3- ITEM 7.01 REGULATION FD DISCLOSURE On December 13, 2004, the Company issued the press release attached hereto as Exhibit 99.01, which is incorporated herein by reference. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 10.01 Cardinal Health, Inc. Management Incentive Plan. 10.02 Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2005. 99.01 Press release issued by the Company on December 13, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Cardinal Health, Inc. (Registrant) Date: December 14, 2004 By: /s/ Paul S. Williams --------------------- Name: Paul S. Williams Title: Executive Vice President, Chief Legal Officer and Secretary -4- EXHIBIT INDEX 10.01 Cardinal Health, Inc. Management Incentive Plan. 10.02 Cardinal Health Deferred Compensation Plan, as amended and restated effective January 1, 2005. 99.01 Press release issued by the Company on December 13, 2004. -5- EX-10.1 2 l10986aexv10w1.txt EXHIBIT 10.1 Exhibit 10.01 CARDINAL HEALTH, INC. MANAGEMENT INCENTIVE PLAN 1. PURPOSE. The purpose of the Cardinal Health, Inc. Management Incentive Plan (the "Plan") is to advance the interests of Cardinal Health, Inc. and its shareholders by providing certain of its key executives with incentive compensation which is tied to the achievement of pre-established and objective performance goals. The Plan is intended to provide participants with incentive compensation which is not subject to the deduction limitation rules prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), and should be construed to the extent possible as providing for remuneration which is performance-based compensation within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. The Plan, formerly known as the Performance - Based Incentive Compensation Plan, was amended on August 4, 2004. 2. DEFINITIONS. Whenever used herein, the following terms shall have their respective meanings set forth below: a. "Award" means the amount payable to a Participant in accordance with Section 6 of the Plan. b. "Committee" means the Human Resources and Compensation Committee (the "Committee") of the Board of Directors of Cardinal Health, Inc. The Committee shall be comprised of two or more "outside directors" as that term is defined in Section 162(m) of the Code and the regulations promulgated thereunder, as amended from time to time. c. "Company" means Cardinal Health, Inc. and its subsidiaries. d. "Effective Date" means the date set forth in Section 9(a) of the Plan. e. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. f. "Participant" means an individual eligible to participate hereunder, as determined by the Committee, each of whom shall be an executive officer of the Company. g. "Performance Period" means any time period established by the Committee, but in no event including any period beyond the end of the fiscal year with respect to which the attainment of Performance Goal(s) relating to an Award will be determined. h. "Performance Goal" means any performance goal determined by the Committee in accordance with Section 5 of the Plan. i. "Target Award" means the amount of any Award as established by the Committee that would be payable to a Participant for any Performance Period if the Performance Goals for the Performance Period were fully (100%) achieved and no negative discretion was exercised by the Committee in regard to that Award pursuant to the last sentence of Section 6. 3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee will have full authority to interpret the Plan, to establish and amend rules and regulations relating to it, to determine the terms and provisions for making Awards and to make all other determinations necessary or advisable for the administration of the Plan. All decisions made by the Committee pursuant to the provisions hereof shall be made in the Committee's sole discretion and shall be final and binding on all persons. 4. ELIGIBILITY. The Committee shall designate the Participants eligible to receive Awards for each Performance Period and establish the Performance Goals applicable to each Participant for each Performance Period. An individual who becomes eligible to participate in the Plan during the Performance Period may be approved by the Committee for a partial period of participation. In such case, the Participant's Target Award and Award will be based upon performance during the portion of the Performance Period during which the Participant participates in the Plan, and the amount of the Target Award will be pro-rated based on the percentage of time the Participant participates in the Plan during the Performance Period. 5. ESTABLISHMENT OF TARGET AWARDS, PERFORMANCE PERIODS AND PERFORMANCE GOALS. For each Performance Period established by the Committee, the Committee shall establish a Target Award for each Participant. Awards shall be earned based upon the financial performance of the Company or one or more operating groups of the Company during a Performance Period; provided, however, the maximum Award that may be paid to any single Participant for any Performance Period is $7,500,000, such maximum Award amount to be pro-rated if the Performance Period is less than a full fiscal year. As to each Performance Period, within such time as established by Section 162(m) of the Code, the Committee will establish in writing Performance Goals based on one or more of the following performance measures of the Company (and/or one or more operating groups of the Company, if applicable) over the Performance Period: (i) cash flow; (ii) earnings (including gross margin, earnings before interest and taxes, earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price; (vi) return on equity or average shareholders' equity; (vii) total shareholder return; (viii) return on capital; (ix) return on assets or net assets; (x) return on investment; (xi) revenue; (xii) income or net income; (xiii) operating income or net operating income; (xiv) operating profit or net operating profit (whether before or after taxes); (xv) operating margin; (xvi) return on operating revenue; (xvii) market share; (xviii) contract awards or backlog; (xix) overhead or other expense reduction; (xx) growth in shareholder value relative to the moving average of the S&P 500 Index or a peer group index; (xxi) credit rating; (xxii) strategic plan development and implementation; (xxiii) improvement in workforce diversity; (xxiv) customer satisfaction; (xxv) employee satisfaction; (xxvi) management succession plan development and implementation; and (xxvii) employee retention. Except as otherwise provided herein, the extent to which the Performance Goals are satisfied will determine the amount of the Award, if any, that will be earned by each Participant. The Performance Goals may vary for different Performance Periods and need not be the same for each Participant eligible for an Award for a Performance Period. 2 6. EARNING OF AWARDS. At the end of each Performance Period, the Award will be computed for each Participant. Payment of Awards, if any, will be made in cash, subject to applicable tax withholding. Prior to payment of any Award, the Committee shall certify in writing the extent to which the established Performance Goals have been achieved. If the Performance Goals are not satisfied to the fullest extent, a recipient may earn less than the full Target Award or no Award at all. In addition, the Committee may in its sole discretion reduce individual Awards otherwise payable pursuant to the Performance Goals. 7. TERMINATION OF EMPLOYMENT. In the event the employment of a Participant is terminated by reason of death or disability during a Performance Period, unless determined otherwise by the Committee, the Participant or his legal representative, as applicable, shall receive a prorated payout with respect to the Award relating to such Performance Period. The prorated payout shall be based upon the length of time that the Participant was employed by the Company during the Performance Period and the progress toward achievement of the established Performance Goal(s) during the portion of the Performance Period during which the Participant was employed by the Company. Payment of the Award, if any, shall be made at the same time payments are made to Participants who did not terminate employment during the applicable Performance Period. In the event of a Participant's termination of employment by the Company for any other reason prior to the end of the Performance Period with respect to an Award, the Participant shall not be entitled to any payment with respect to such Award. 8. AMENDMENT AND TERMINATION. The Committee may amend, modify or terminate the Plan at any time and from time to time. Shareholder approval of such actions will be required only as required by applicable law. Notwithstanding the foregoing, no amendment, modification or termination shall affect the payment of an Award for a Performance Period that has already ended or increase the amount of any Award. 9. GENERAL PROVISIONS. a. Effective Date. The Plan shall become effective as of July 1, 1996, subject to its approval by the shareholders of Cardinal Health, Inc. b. Non-Transferability. Any interest of any Participant under the Plan may not be sold, transferred, alienated, assigned or encumbered, other than by will or pursuant to the laws of descent and distribution, and any attempt to take any such action shall be null and void. c. Severability. In the event any provision of the Plan is held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provisions had never been contained in the Plan. d. Additional Arrangements. Nothing contained in this Plan shall prevent the Company from adopting other or additional compensation arrangements for any Participant. 3 e. No Right to Award or Employment; Uniformity. No person shall have any claim or right to be granted an Award under this Plan and the grant of an Award shall not confer upon any Participant any right to be retained as an employee of Cardinal Health, Inc. or any of its subsidiaries, nor shall it interfere in any way with the right of Cardinal Health, Inc. or any subsidiary to terminate the employment of any Participant at any time or to increase or decrease the compensation of any Participant. There is no obligation for uniformity of treatment of Participants. f. Tax Withholding. The Company shall have the right to withhold or require Participants to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Award. g. Beneficiaries. The Committee may establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the Participant's death are to be paid. If no beneficiary is designated, the right of the Participant to receive any payment under this Plan will pass to the Participant's estate. h. Laws Governing. The Plan and all Awards made and action taken hereunder shall be governed by and construed in accordance with the laws of the State of Ohio, except to the extent superseded by federal law. i. Government Regulation. Notwithstanding any provisions of the Plan or any agreement made pursuant to the Plan, the Company's obligations under the Plan and such agreement shall be subject to all applicable laws, rules and regulations and to such approvals as may be required by any governmental or regulatory agencies. j. Unfunded Status of Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. With respect to any payments not yet made by the Company to a Participant or beneficiary, nothing contained herein shall give any such Participant or beneficiary any rights that are greater than those of a general creditor of the Company. 4 EX-10.2 3 l10986aexv10w2.txt EXHIBIT 10.2 Exhibit 10.02 CARDINAL HEALTH DEFERRED COMPENSATION PLAN Amended and Restated Effective January 1, 2005 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND GENERAL PROVISIONS...................................................... 1 ARTICLE II ELIGIBILITY AND PARTICIPATION........................................................... 5 ARTICLE III DEFERRED COMPENSATION AND MATCHING CREDITS.............................................. 6 ARTICLE IV VESTING................................................................................. 10 ARTICLE V DISTRIBUTION OF BENEFITS................................................................ 11 ARTICLE VI PLAN ADMINISTRATION..................................................................... 13 ARTICLE VII AMENDMENT AND TERMINATION............................................................... 16 ARTICLE VIII MISCELLANEOUS PROVISIONS................................................................ 16
i CARDINAL HEALTH DEFERRED COMPENSATION PLAN The Cardinal Health Deferred Compensation Plan (the "Plan") is hereby amended and restated effective as of January 1, 2005 by Cardinal Health, Inc., an Ohio corporation (the "Company"), for the benefit of members of the Board of Directors of the Company and a select group of the management and highly compensated employees of the Company and of its affiliated entities which adopt and participate in this Plan with the consent of the Company. Background Information A. The Company desires to continue to maintain the Plan in order to provide certain of its highly compensated and management employees with the opportunity to defer a portion of the base salary, bonuses and other cash compensation otherwise payable to them. B. The Company intends for the Plan to continue to be an unfunded, nonqualified deferred compensation arrangement as provided under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and to satisfy the requirements of a "top hat" plan thereunder and under Labor Reg. Sec. 2520.104-23. C. The Company also hereby consolidates other nonqualified deferred compensation arrangements established for the members of the Company's Board of Directors and by certain affiliates of the Company for their management and highly compensated employees with and into this Plan as a single, uniform deferred compensation arrangement available to Company directors and a select group of eligible employees of the Company on and after the effective date of this restated Plan. D. This amended and restated Plan is intended to comply with the requirements of The American Jobs Creation Act of 2004 ("AJCA") and new Section 409A of the Internal Revenue Code of 1986, as amended ("Code"), and to constitute a good faith effort at meeting such requirements pending the issuance of guidance by the Internal Revenue Service ("IRS"). To the extent inconsistent with Section 409A or regulations issued thereunder, this Plan shall be amended to conform to such requirements within applicable time limitations established by the IRS. Finally, to the maximum extent permitted by applicable law, it is the intent of this Plan to maintain all rights as in effect under prior law applicable to the Plan and to any other plans combined within this Plan, and to all vested balances as of December 31, 2004 under this Plan and any other plans combined within this Plan, to the extent grandfathered by the provisions of AJCA, Code Section 409A or regulations issued under that section. ARTICLE I DEFINITIONS AND GENERAL PROVISIONS 1.1 Definitions. Unless the context requires otherwise, the terms defined in this Article shall have the meanings set forth below unless the context clearly requires another meaning. When the defined meaning is intended, the term is capitalized: (a) Account. The bookkeeping account described in Section 3.6 under which benefits and earnings are credited on behalf of a Participant. (b) Administrative Committee. The Financial Benefit Plans Committee or such other committee of at least three (3) persons appointed by the Human Resources and Compensation Committee of the Board to oversee the administration of the Plan. (c) Beneficiary. The person(s) entitled to receive any distribution hereunder upon the death of a Participant. The Beneficiary for benefits payable under this Plan shall be the beneficiary designated by the Participant in accordance with procedures established by the Administrative Committee as of the Participant's date of death, or, in the absence of any such designation, the Participant's estate. (d) Board. The Board of Directors of the Company or the Human Resources and Compensation Committee thereof. (e) Change of Control. For purposes of the Plan, a Change of Control means: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or more of either (A) the then outstanding Shares of the Company (the "Outstanding Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this Subsection (i), the following acquisitions shall not constitute a Change of Control: (I) any acquisition directly from the Company or any corporation controlled by the Company, (II) any acquisition by the Company or any corporation controlled by the Company, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (IV) any acquisition by any corporation that is a Non-Control Acquisition (as defined in Subsection (iii) of this Section); or (ii) individuals who, as of the Effective Date of this Plan, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or 2 (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition by the Company of assets or shares of another corporation (a "Business Combination"), unless, such Business Combination is a Non-Control Acquisition. A "Non-Control Acquisition" shall mean a Business Combination where: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Shares and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Shares and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, twenty-five percent (25%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination (including any ownership that existed in the Company or the company being acquired, if any) and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (f) Code. The Internal Revenue Code of 1986, as amended from time to time. (g) Company. Cardinal Health, Inc., or any affiliate thereof or successor thereto which adopts the Plan with the consent of Cardinal Health, Inc. (h) Compensation. Amounts paid or payable by the Company to an Eligible Employee for a Plan Year which are includable in income for federal tax purposes, including base salary and variable compensation in the form of commissions and/or bonuses (except as otherwise provided herein). Notwithstanding the foregoing, the following amounts are excluded from Compensation: (i) other cash or non-cash compensation, expense reimbursements or other benefits or contributions by the Company to any other employee benefit plan, other than pre-tax salary deferrals into the Qualified Plan or any Code Section 125 plan sponsored by the Company or any of its affiliates, (iii) amounts realized (A) from the exercise of a stock option, (B) when restricted stock (or property) held by a Participant either becomes freely transferable or is no 3 longer subject to a substantial risk of forfeiture, (C) when the Shares underlying restricted share units are payable to a Participant, or (D) from the sale, exchange or other disposition of stock acquired under a qualified stock option, and (ii) any amounts that are required to be withheld from a Participant's wages from the Company pursuant to Code Section 3102 to satisfy the Participant's tax obligations under Code Section 3101. With respect to Directors, "Compensation" means any and all fees paid for service as a member of the Board, including fees for attendance at meetings or committee meetings. (i) Director. A member of the Board of Directors of the Company. (j) Distribution Options. A single lump sum or annual installment payments over a period of five (5) or ten (10) years. The standard form of distribution shall be a single lump sum payment unless otherwise elected by a Participant in accordance with the terms of the Plan or as determined by the Company to the extent permitted by Code Section 409A and regulations thereunder. (k) Effective Date. January 1, 2005. (l) Eligible Employee. Any individual who is (i) an employee who is a Reporting Person or (ii) (A) among a select group of management or highly compensated employees (within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA), and (B) designated by the Company as eligible to make Compensation deferral contributions under Article II of the Plan in accordance with eligibility criteria established from time to time by the Administrative Committee, the Policy Committee or the Board. (m) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. (n) Participant. Any Director or any Eligible Employee who meets the eligibility requirements for participation in the Plan as set forth in Article II and who earns benefits under the Plan. (o) Plan. The Cardinal Health Deferred Compensation Plan, as set forth herein, and as such Plan may be amended from time to time hereafter. (p) Plan Year. The fiscal year of the Plan, which is the twelve (12) consecutive month period beginning January 1 and ending December 31. (q) Policy Committee. The Employee Benefits Policy Committee of the Company. (r) Qualified Plan. The Cardinal Health 401(k) Savings Plan, as amended from time to time. (s) Reporting Person. Eligible Employees and Directors who are subject to Section 16 of the Securities Exchange Act of 1934, as amended. (t) Retirement. An Eligible Employee's termination of employment with the Company following attainment of age 65 or the retirement from the Board of any Director. 4 (u) Shares. The common shares, without par value, of the Company. (v) Total Disability. Occurs when a Participant is either unable to engage in any substantial gainful activity or is receiving income replacement benefits under an accident and health plan covering employees for a period of not less than three (3) months, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. The Company shall determine the existence of a Total Disability in its sole discretion and may require the Participant to submit to periodic medical examinations at the Participant's expense to confirm the existence and continuation of a Total Disability. 1.2 General Provisions. The masculine wherever used herein shall include the feminine; singular and plural forms are interchangeable. Certain terms of more limited application have been defined in the provisions to which they are principally applicable. The division of the Plan into Articles and Sections with captions is for convenience only and is not to be taken as limiting or extending the meaning of any of its provisions. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 General Eligibility Conditions. To become eligible to participate in the Plan, an individual must be (i) a Reporting Person, or (ii) (A) among a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA and (B) designated as an Eligible Employee by the Company (or another participating affiliated employer) to receive any applicable Company contributions and to make Compensation deferral contributions under the Plan. In order to receive a benefit under the Plan, however, a Participant must also meet the requirements of Sections 2.2 and 2.3. 2.2 Specific Conditions for Active Participation. To participate actively in the Plan (i.e., to make deferrals hereunder), a Participant must execute or acknowledge a Compensation Deferral Agreement, or otherwise agree to defer some of his Compensation in accordance with such other procedures, including electronic enrollment, as are established by the Administrative Committee from time to time. A Participant's Compensation Deferral Agreement shall be maintained by or on behalf of the Administrative Committee and must be executed, acknowledged, filed or submitted electronically within thirty (30) days of first becoming eligible to participate in the Plan and, for all subsequent deferral elections after initial participation, in advance of the beginning of the calendar year during which such compensation is expected to be earned, or at such other time as may be required by regulations issued under Code Section 409A. In all cases, a Participant's election to defer Compensation shall be made prior to the time any of the Compensation covered by such election is to be earned by such Participant. Elections to participate and defer Compensation shall be irrevocable with respect to the Compensation to which they apply and may be amended, revoked or suspended by the Participant only effective as of the January 1st following the amendment, revocation or suspension in accordance with procedures established by the Administrative Committee, unless transition rules and regulations under Code Section 409A permit amendment, revocation or suspension as of some other time. 5 2.3 Eligibility List; Suspension of Active Participation. The Administrative Committee shall maintain a written list of those employees who then qualify as Eligible Employees under the Plan, as determined by the eligibility criteria established by the Company. Any Participant not listed as an Eligible Employee for a given Plan Year shall cease to have any right to defer Compensation for such Plan Year. However, any amounts credited to the Account of a Participant whose participation is suspended shall otherwise continue to be maintained under the Plan in accordance with its terms. All Reporting Persons shall be eligible to participate in the Plan at all times during which they are a Reporting Person. 2.4 Termination of Participation. Once an Eligible Employee becomes a Participant, such individual shall continue to be a Participant until such individual (i) ceases to be described as a Director or as an Eligible Employee, and (ii) ceases to have any vested interest in the Plan (as a result of distributions made to such Participant or his Beneficiary, if applicable, or otherwise). 2.5 Participation by Other Employers. With the consent of the Company, any corporation that is a member of the same controlled group as the Company (within the meaning of Code Section 1563(a)) may become a participating employer under the Plan by taking such action as may be necessary or desirable to put the Plan into effect with respect to such corporation. Accrued account amounts under certain nonqualified deferred compensation plans sponsored by the Company for the members of the Board or by certain affiliates of the Company for their employees shall be transferred to and assumed by this Plan effective as of January 1, 2005. Notwithstanding any other provision of the Plan to the contrary, the terms of any such plans shall thereafter be governed by the terms of this Plan provided that the accrued benefit of all participants in such plans shall not be reduced and shall be preserved and assumed by this Plan. ARTICLE III DEFERRED COMPENSATION AND MATCHING CREDITS 3.1 Deferred Compensation Credits. Pursuant to the provisions of Article II and this Article III, a Participant and the Company may, by mutual agreement, provide for deferred and postponed payment of a percentage of the Participant's Compensation which otherwise would be paid during the applicable Plan Year(s) for services to be rendered in such year(s). All elections to defer Compensation must be made within thirty (30) days after the date the Participant first becomes eligible to participate in the Plan or, for subsequent elections after initial eligibility, prior to the calendar year during which the Compensation is expected to be earned or at such other time as may be specified under regulations issued under the Code. In the case of the deferral of any performance-based Compensation based on services performed over a period of at least 12 months, such election must also be made no later than six (6) months before the end of the performance period. A Participant who is an Eligible Employee may defer between one percent (1%) and twenty percent (20%) of Compensation. A Participant who is a Director may defer between twenty percent (20%) and one hundred percent (100%) of Compensation. The Company may, in its discretion, establish and change from time to time the minimum and maximum amount that may be so deferred for Participants who are not Reporting Persons. Elections shall be made in accordance with procedures established by the Administrative 6 Committee. In addition, special limitations may be established by the Administrative Committee to apply to the deferral of any special bonus or other non-periodic Compensation that a Participant who is not a Reporting Person is expected to receive. The Company will credit the deferred compensation amount agreed to for each Plan Year to the Participant's Account from time to time as the deferred amounts otherwise would have been earned by the Participant. All contributions under this provision to the Accounts of Participants in the Plan, as adjusted for earnings or losses (described below), are referred to as "Deferred Compensation Credits." 3.2 Matching Credits. The Company may, in its discretion, credit to a Participant's Account each Plan Year during which the Participant is selected to participate in the Plan an amount equal to a percentage of the Participant's Deferred Compensation Credits as a matching contribution. The amount of any such contributions may vary from year to year or among Participants in the discretion of the Company. In general, such matching contributions may be made at the same rate as is applicable to the Participant under the Qualified Plan, but only with respect to the portion of a Participant's deferrals from the first $100,000 of Compensation in excess of the maximum amount of Compensation recognized under the Qualified Plan under Section 401(a)(17) of the Code for the fiscal year of the Qualified Plan that coincides with or ends within the Plan Year of this Plan. All contributions under this provision to the Accounts of Participants in the Plan, as adjusted for earnings or losses (described below), are referred to as "Matching Credits." 3.3 Suspension of Deferrals. Participant Deferred Compensation Credits hereunder will be automatically suspended during any unpaid leave of absence or temporary layoff. Contributions suspended in accordance with the provisions of this paragraph shall be automatically resumed, without the necessity of any action by the Participant, upon return to employment at the expiration of such suspension period. 3.4 Company Contribution and Social Security Supplement Credits. The Company may, in its discretion, credit to the Participant's Account each Plan Year an amount equal to a percentage of the Participant's Compensation from the Company in excess of the dollar limitation in effect for the year under Section 401(a)(17) of the Code, but not more than an excess of $100,000 above such compensation limit. All contributions under this provision to the Accounts of Participants in the Plan, as adjusted for earnings or losses (described below), are referred to as "Company Contribution Credits." In addition, the Company may make an additional discretionary contribution for a Plan Year to the Participant's Account, as determined by the Company in its discretion, equal to a percentage of the Participant's Compensation from the Company in excess of the dollar limitation in effect for the year under Section 401(a)(17) of the Code, but not more than an excess of $100,000 above such compensation limit, for the purpose of supplementing the benefits the Participant will receive at retirement under the Social Security program. All contributions under this provision to the Accounts of Participants in the Plan, as adjusted for earnings or losses (described below), are referred to as "Social Security Supplement Credits." Contributions made to Participant Accounts under this Section may be subject to additional requirements as established from time to time by the Policy Committee, such as a requirement to be employed on the last day of the Plan Year. 3.5 Prior Plan Accounts. The Company will credit to the Participant's Account the accrued benefit of the Participant under any other nonqualified deferred compensation plan or 7 arrangement sponsored by the Company or one of its affiliates that is consolidated and merged with and into this Plan. All amounts credited as contributions under this provision to the Accounts of Participants in the Plan, as adjusted for earnings or losses (described below), are referred to as "Prior Plan Credits." A schedule of the nonqualified deferred compensation plans merged with and into this Plan, and of the amounts credited to the Accounts of Participants from such prior plans, shall be maintained by the Administrative Committee. 3.6 Record of Account. Solely for the purpose of measuring the amount of the Company's obligations to each Participant or his beneficiaries under the Plan, the Company will maintain a separate bookkeeping record, an "Account," for each Participant in the Plan. The Company, in its discretion, may either credit a hypothetical earnings rate to the Participant's Account balance for the Plan Year, or may actually invest an amount equal to the amount credited to the Participant's Account from time to time in an account or accounts in its name with investment media or companies, which investment options may include some or all of those used for investment purposes under the Qualified Plan, as determined by the Company in its discretion. The Company may also establish a deferred compensation trust that qualifies as a so-called "rabbi" trust meeting applicable requirements of Code Section 409A. If such separate investments are made, the Participant may be permitted to direct the investment of the portion of the Company's accounts allocable to him under the Plan in the same manner he is permitted to direct the investment of his account in the Qualified Plan, except that certain of the investment options may not be available options under this Plan. The Participant may change the allocation of his Account among the applicable investment alternatives then available under the Plan in accordance with procedures established by the Administrative Committee from time to time. In no event shall a Participant who is a current Reporting Person, or who has been a Reporting Person during the last six (6) months, be permitted to change any amounts invested in any other investment alternative to a Cardinal Stock Account (as defined below). In addition, a Participant who is a current Reporting Person, or who has been a Reporting Person during the last six (6) months, shall not be permitted to change any investment in a Cardinal Stock Account to any other investment alternative, except that a Participant who becomes a Reporting Person (other than a Director) after commencing participation in the Plan and who has an investment in a Cardinal Stock Account may make a one-time election while such Participant is a Reporting Person to direct all or a portion of the investment in a Cardinal Stock Account into an alternate investment option available under the Plan. After a Participant ceases to be a Reporting Person for at least six (6) months, such Participant may again change investments into or out of a Cardinal Stock Account in accordance with rules established by the Administrative Committee and without regard to the above restrictions. The Company is not obligated to make any particular investment options available, however, if investments are in fact made, and may, from time to time in its sole discretion, change the investment alternatives. Nothing herein shall be construed to confer on the Participant the right to continue to have any particular investment available. The Company will credit the Participant's Account with hypothetical or actual earnings or losses at least quarterly based on the earnings rate declared by the Company or the performance results of the Company's account(s) invested pursuant to the Company's or the Participant's directions, and shall determine the fair market value of the Participant's Account based on the bookkeeping record or the fair market value of the portion of the Company's accounts representing the Participant's Account. The determination of the earnings, losses or 8 fair market value of the Participant's Account may be adjusted by the Company to reflect its payroll, income or other taxes or costs associated with the Plan, as determined by the Company in its sole discretion. 3.7 Special Rules Applicable to Investments in Shares. Subject to the provisions of this Article III, a Participant may also elect to have all or a portion of his Account to be deemed invested in Shares (such dollar amounts shall be referred to as the "Share Election Accumulations"). On the date when the amounts to be credited to the Participant's Share Election Accumulations are otherwise allocated to his Account, the Company will credit to a separate sub-account (the Participant's "Cardinal Stock Account") a number of hypothetical Shares (and fractions thereof) having a Value equal to the Share Election Accumulations. For purposes of this Plan, the "Value" of a Share on a particular day shall mean the closing trading price of a Share on the New York Stock Exchange on that day (or, if there is no trading of the Shares on that day, on the most recent previous date on which trading occurred). With respect to any Director, any election made pursuant to this Section shall be irrevocable for all amounts credited to a Participant's Account during the Plan Year for which the election is made. Any election made by a Director pursuant to this Section shall remain in effect for amounts credited to the Participant's Account in subsequent Plan Years unless the Participant delivers a written notice to the Secretary of the Company setting forth a different investment election, which shall be applied to future Plan Years until further written notice is received by the Secretary of the Company pursuant to this Section. Except for Directors, no other Reporting Person may elect to invest future contributions in his Account in Shares. Such other Reporting Person may again elect to invest future contributions in his Account in Shares subject to this Section 3.7 after he ceases to be a Reporting Person. If any Organic Change shall occur, then the Participant's Cardinal Stock Account (if any) shall be adjusted so as to contain such shares of stock, securities or assets (including cash) as would have been issued or payable with respect to or in exchange for the number of Shares credited thereto immediately before such Organic Change, if such Shares had been outstanding. An "Organic Change" includes the recapitalization, reorganization, reclassification, consolidation, or merger of the Company, or any sale of all or substantially all of the Company's assets to another person or entity, or any other transaction which is effected in such a way that holders of Shares are entitled to receive (either directly or upon subsequent liquidation) other stock, securities, or assets with respect to or in exchange for Shares. If the assets held in the Participant's Cardinal Stock Account immediately after such adjustment are not equity securities, then the Participant shall be permitted to re-direct the investment thereof into the other investment choices then available under this Plan. In the case of the Cardinal Stock Account (if any) of a Participant other than a Reporting Person (as of the Dividend Payment Date), the earnings (or losses) credited to such account shall consist solely of dividend equivalent credits pursuant to this paragraph. Whenever a dividend or other distribution is made with respect to the Shares, then the Cardinal Stock Account of a Participant who is not a Reporting Person (as of the Dividend Payment Date) shall be credited, on the payment date for such dividend or other distribution (the "Dividend Payment Date"), with a number of additional Shares having a Value, as of the Dividend Payment Date, based upon the number of Shares deemed to be held in the Participant's Cardinal Stock Account as of the record date for such dividend or other distribution (the "Dividend Record Date"), if such Shares were 9 outstanding. If such dividend or other distribution is in the form of cash, the number of Shares so credited shall be a number of Shares (and fractions thereof) having a Value, as of the Dividend Payment Date, equal to the amount of cash that would have been distributed with respect to the Shares deemed to be held in the Participant's Cardinal Stock Account as of the Dividend Record Date, if such Shares were outstanding. If such dividend or other distribution is in the form of Shares, the number of Shares so credited shall equal the number of such Shares (and fractions thereof) that would have been distributed with respect to the Shares deemed to be held in the Participant's Cardinal Stock Account as of the Dividend Record Date, if such Shares were outstanding. If such dividend or other distribution is in the form of property other than cash or Shares, the number of Shares so credited shall be a number of Shares (and fractions thereof) having a Value, as of the Dividend Payment Date, equal to the value of the property that would have been distributed with respect to the Shares deemed to be held in the Participant's Cardinal Stock Account as of the Dividend Record Date, if such Shares were outstanding. The value of such property shall be its fair market value as of the Dividend Payment Date, determined by the Board based upon market trading if available and otherwise based upon such factors as the Board deems appropriate. With respect to a Participant who is a Reporting Person on the Dividend Payment Date, the cash value of the dividend or other distribution shall be invested in an alternate investment option under the Plan, as determined by the Administrative Committee in its sole discretion. To the extent that the dividend or other distribution is made in a form other than cash, the Shares or other property shall be liquidated to cash as soon as administratively practicable and thereafter invested as indicated herein. ARTICLE IV VESTING 4.1 Vesting. A Participant always will be one hundred percent (100%) vested in amounts credited to his Account as Deferred Compensation Credits, Matching Credits made on or after January 1, 2005, Prior Plan Credits and earnings allocable thereto. The Participant or his Beneficiaries shall be entitled to benefits from Matching Credits made prior to January 1 2005, Company Contribution Credits and Social Security Supplement Credits allocated to his Account by the Company, and earnings thereon, only upon satisfaction of the vesting requirements of this Article IV. The Participant shall become one hundred percent (100%) vested in his Account upon his Retirement, death, Total Disability or upon a Change of Control of the Company. If the Participant terminates employment with the Company and all participating employers for any reason other than Retirement, death, Total Disability, or pursuant to a Change of Control, all rights of the Participant, his Beneficiaries, executors, administrators, or any other person to receive benefits under this Plan derived from amounts credited as Matching Credits made prior to January 1, 2005, Company Contribution Credits and Social Security Supplement Credits shall vest as of the date that the Participant has completed three (3) Years of Service with the Company or any of its affiliates. A "Year of Service" for this purpose means a period of twelve (12) consecutive calendar months during which the Participant was employed by the Company or one of its affiliates. If a Participant terminates employment before that date (other than due to a Change of Control, Retirement, death or Total Disability), all Matching Credits made prior to 10 January 1, 2005, Company Contribution Credits and Social Security Supplement Credits shall be forfeited. If the Participant terminates employment but is subsequently re-employed by the Company or another participating employer, no benefits forfeited hereunder shall be reinstated unless otherwise determined by the Company in its sole discretion. 4.2 Confidentiality and Non-Competition Agreement. In its discretion, the Company may require any Eligible Employee selected to become a Participant in the Plan to execute a Confidentiality and Non-Competition Agreement with the Company and/or its affiliates in consideration of the benefits to be provided hereunder. ARTICLE V DISTRIBUTION OF BENEFITS 5.1 Distribution Timing. A Participant shall receive payment of the amounts credited to his Account upon his termination from employment or from the Board due to Retirement, death, Total Disability or any other reason. The Participant will begin to receive the amount credited to his Account as of such date beginning on the first regular payment processing date to occur at least six (6) months after the date of the Participant's termination, Retirement, death or Total Disability. The Administrative Committee may establish regular payment processing dates and change the same from time to time in its discretion, provided there are at least two such dates each Plan Year. If payment is to be made in a lump sum, it shall occur on the first regular payment processing date as described above. If payment is to be made in annual installments, it shall commence on such first regular payment processing date with subsequent annual installments to occur on the same date each year thereafter until the Participant's Account is distributed in full 5.2 Distribution upon Retirement or Other Termination of Employment or Service as a Director. Upon Retirement or other termination of employment or membership on the Board, the Participant shall be eligible to receive payment of the amounts credited to the Participant's Account in the standard Distribution Option commencing as of the date specified in Section 5.1, above. Alternatively, a Participant may elect another Distribution Option at the time of initial enrollment in the Plan or, for existing Participants as of the date this Plan is amended and restated, prior to January 1, 2005. The Participant may change his election of a Distribution Option pursuant to an election made during the annual deferral election period prior to the beginning of each Plan Year, provided said election is made at least twelve (12) months prior to the date that payments would have otherwise begun under such option and provided that a Participant may not change a Distribution Option to one that would complete the distribution of the Participant's Account more quickly than the election in effect at the date of the new election. If a Distribution Option election is made or changed and distribution is triggered before twelve (12) months have elapsed, the distribution will be made in accordance with the Distribution Option election in effect prior to the change or, if none, in accordance with the standard Distribution Option. If an annual installment payment method is the selected Distribution Option, the amount of the annual benefit shall equal the amount necessary to fully distribute the Participant's Account as an annual benefit payable over the installment period, consistent with the following methodology: the amount payable as the annual installment shall equal the value of the Participant's Account as of the most recent Account valuation date, multiplied by a 11 fraction, the numerator of which is one (1) and the denominator of which is the number of annual installments remaining in the installment period elected by the Participant. For example, assuming a ten (10) year installment payment period applies, the amount distributed at each of the distribution dates would represent the value of the Participant's Account as of the most recent valuation date preceding the actual distribution date times the following factors: Year 1 - - 10% (1/10), Year 2 - 11.11% (1/9), Year 3 - 12.5% (1/8), Year 4 - 14.29% (1/7), Year 5 - 16.66% (1/6), Year 6 - 20% (1/5), Year 7 - 25% (1/4), Year 8 - 33.33% (1/3), Year 9 - 50% (1/2) and Year 10 - 100% (1/1). Notwithstanding the foregoing, if the Participant's employment or service on the Board terminates within two (2) years after a Change of Control occurs, then the Participant's Account shall be payable in a single lump sum on the first regular payment processing date after the termination of the Participant's employment unless a longer delay is required by applicable law, in which event the lump sum shall be paid as soon as is permitted by applicable law. The Participant must provide the Company advance notice of his intention to retire and receive benefits hereunder in accordance with uniform procedures established by the Administrative Committee. Payments of amounts credited to the Participant's Account will be made in U.S. dollars, except for amounts credited to the Participant's Cardinal Stock Account, if any, which shall be payable in the form of Shares plus cash in lieu of any fractional shares. 5.3 Distribution upon Death. In the event of the death of the Participant while receiving benefit payments under the Plan, the Beneficiary or Beneficiaries designated by the Participant shall be paid the remaining payments due under the Plan in accordance with the method of distribution in effect to the Participant at the date of death. In the event of the death of the Participant prior to the commencement of the distribution of benefits under the Plan, such benefits shall be paid to the Beneficiary or Beneficiaries designated by the Participant, beginning as soon as practicable after the Participant's death. Such benefits shall be paid in the standard Distribution Option unless another Distribution Option was timely elected by the Participant at least twelve (12) months prior to his death. 5.4 Distribution in the Event of Total Disability. Upon the Participant's Total Disability, the Participant shall be eligible to receive payment of the amounts credited to his Account in the standard Distribution Option commencing as soon as practicable after the Administrative Committee is satisfied of the determination of the existence of a Total Disability with respect to such Participant The Participant's Account may also be payable in one of the other Distribution Options provided such other Distribution Option was timely elected by the Participant at least twelve (12) months prior to his Total Disability. Total Disability shall be considered to have ended and entitlement to a disability benefit shall cease if the Participant (i) is re-employed by the Company or one of its affiliates, or (ii) engages in any substantial gainful activity, except for such employment as is found by the Administrative Committee in its sole discretion to be for the primary purpose of rehabilitation or not incompatible with a finding of total and permanent disability. If entitlement to a disability benefit ceases in accordance with the provisions of this paragraph, the Participant shall not be prevented from qualifying for a benefit under another provision of the Plan. 5.5 Special Rules for Prior Plan Credits. Amounts credited to a Participant's Account as Prior Plan Credits shall be payable under the terms of this Plan notwithstanding any contrary provisions of the Prior Plan. Notwithstanding the foregoing, any amounts that are currently 12 being paid to Participants who are no longer employed by the Company or no longer members of the Board as of the effective date of this amended and restated Plan, shall continue to be distributed in accordance with the elections in effect as of that date unless to do so is not permitted under Code Section 409A and regulations issued thereunder. 5.6 Withdrawals for Unforeseeable Emergency. Upon the occurrence of an unforeseeable emergency, the Participant shall be eligible to receive payment of the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the participant's assets (to the extent such liquidation would not itself cause severe financial hardship). The amount determined to be properly distributable under this section and applicable regulations under Code Section 409A shall be payable in a single lump sum only. For the purposes of this section, the term "unforeseeable emergency" means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's spouse, or a dependent of the Participant (as defined in Code Section 152(a)); loss of the Participant's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. It shall be the responsibility of the Participant seeking to make a withdrawal under this section to demonstrate to the Administrative Committee that an unforeseeable emergency has occurred and to document the amount properly distributable hereunder. ARTICLE VI PLAN ADMINISTRATION 6.1 Administration. The Plan shall be administered by the Administrative Committee as an unfunded deferred compensation plan that is not intended to meet the qualification requirements of Code Section 401. 6.2 Administrative Committee. The Administrative Committee will operate and administer the Plan and shall have all powers necessary to accomplish that purpose, including, but not limited to, the discretionary authority to interpret the Plan, the discretionary authority to determine all questions relating to the rights and status of Eligible Employees and Participants, and the discretionary authority to make such rules and regulations for the administration of the Plan as are not inconsistent with the terms and provisions hereof or applicable law, as well as such other authority and powers relating to the administration of the Plan, except such as are reserved by the Policy Committee or by the Plan to the Policy Committee or the Board. All decisions made by the Policy Committee or the Administrative Committee shall be final. Without limiting the powers set forth herein, the Administrative Committee shall have the power (i) to change or waive any requirements of the Plan to conform with the law or to meet special circumstances not anticipated or covered in the Plan; (ii) to determine the times and places for holding meetings of the Administrative Committee and the notice to be given of such meetings; (iii) to employ such agents and assistants, such counsel (who may be counsel to the Company), and such clerical and other services as the Administrative Committee may require in 13 carrying out the provisions of the Plan; and (iv) to authorize one or more of their number or any agent to execute or deliver any instrument on behalf of the Administrative Committee. The members of the Administrative Committee, the Policy Committee, and the Company and its officers and directors, shall be entitled to rely upon all valuations, certificates and reports furnished by any funding agent or service provider, upon all certificates and reports made by an accountant, and upon all opinions given by any legal counsel selected or approved by the Administrative Committee, and the members of the Administrative Committee, the Policy Committee, and the Company and its officers and directors shall, except as otherwise provided by law, be fully protected in respect of any action taken or suffered by them in good faith in reliance upon any such valuations, certificates, reports, opinions or other advice of a funding agent, service provider, accountant or counsel. 6.3 Statement of Participant's Account. The Administrative Committee shall, as soon as practicable after the end of each Plan Year, provide to each Participant a statement setting forth the Account of such Participant under Section 3.6 as of the end of such Plan Year. Such statement shall be deemed to have been accepted as correct unless written notice to the contrary is received by the Administrative Committee within thirty (30) days after providing such statement to the Participant. Account statements may be provided more often than annually in the discretion of the Administrative Committee. 6.4 Filing Claims. Any Participant, Beneficiary or other individual (hereinafter a "Claimant") entitled to benefits under the Plan, or otherwise eligible to participate herein, shall be required to make a claim with the Administrative Committee (or its designee) requesting payment or distribution of such Plan benefits (or written confirmation of Plan eligibility, as the case may be), on such form or in such manner as the Administrative Committee shall prescribe. Unless and until a Claimant makes proper application for benefits in accordance with the rules and procedures established by the Administrative Committee, such Claimant shall have no right to receive any distribution from or under the Plan. 6.5 Notification to Claimant. If a Claimant's application is wholly or partially denied, the Administrative Committee (or its designee) shall, within ninety (90) days, furnish to such Claimant a written notice of its decision. Such notices shall be written in a manner calculated to be understood by such Claimant, and shall contain at least the following information: (i) the specific reason or reasons for such denial; (ii) specific reference to pertinent Plan provisions upon which such denial is based; (iii) a description of any additional material or information necessary for such Claimant to perfect his claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the Plan's claim review procedure describing the steps to be taken by such Claimant, if he wishes to submit his claim for review. 14 6.6 Review Procedure. Within sixty (60) days after the receipt of such notice from the Administrative Committee, such Claimant, or the duly authorized representative thereof, may request, by written application to the Plan, a review by the Administrative Committee of the decision denying such claim. In connection with such review, such Claimant, or duly authorized representative thereof, shall be entitled to receive any and all documents pertinent to the claim or its denial and shall also be entitled to submit issues and comments in writing. The decision of the Administrative Committee upon such review shall be made promptly and not later than sixty (60) days after the receipt of such request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty (120) days after the Administrative Committee's receipt of a request for review. Any such decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. 6.7 Payment of Expenses. All costs and expenses incurred in administering the Plan shall be paid from the Plan unless the Company elects to pay the costs and expenses. 6.8 Special Restrictions Applicable to Shares. Notwithstanding any other provision of this Plan or any Deferred Compensation Agreement, the Company shall not be required to issue or deliver any certificate or certificates for Shares under this Plan prior to fulfillment of all of the following conditions: (i) Listing or approval for listing upon official notice of issuance of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be a market for the Shares; (ii) Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Chairman shall, in his absolute discretion upon the advice of counsel, deem necessary or advisable; and (iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Chairman shall, in his absolute discretion upon the advice of counsel, determine to be necessary or advisable. Nothing contained in this Plan shall prevent the Company from adopting other or additional compensation arrangements for the Participants. 6.9 Shares Available. The maximum aggregate number of Shares which may be credited to Cardinal Stock Accounts pursuant to this Plan is 2,340,000 Shares issuable under the Plan may be taken from authorized but unissued Shares, treasury Shares, Shares held in a trust for purposes of the Plan, or purchased on the open market. No single Participant who is an Eligible Employee may acquire under the Plan more than 1,125,000 Shares, and no single Participant who is a Director may acquire under the Plan more than 45,000 Shares. In the event of any stock dividend, stock split, share combination, corporate separation or division (including, but not limited to, split-up, spin-off, split-off or distribution to the Company's shareholders other than a normal cash dividend), or partial or complete liquidation, 15 or any other corporate transaction or event having any effect similar to any of the foregoing, then the aggregate number of Shares reserved for issuance under the Plan shall be appropriately substituted for new shares or adjusted, as determined by the Board in its sole discretion. ARTICLE VII AMENDMENT AND TERMINATION 7.1 Amendment. The Company has reserved, and does hereby reserve, the right at any time and from time to time by action of the Board (or by action of the Policy Committee or the Administrative Committee if and to the extent that the Board has delegated the authority to amend the provisions of the Plan to either such committee) to amend, modify or alter any or all of the provisions of the Plan without the consent of any Eligible Employees or Participants; provided, however, that no amendment shall operate retroactively so as to affect adversely any rights to which a Participant may be entitled under the provisions of the Plan as in effect prior to such action. Any such amendment, modification or alteration shall be expressed in an instrument executed by an authorized officer or officers of the Company, and shall become effective as of the date designated in such instrument. 7.2 Termination. The Company reserves the right to suspend, discontinue or terminate the Plan, at any time in whole or in part; provided, however, that a suspension, discontinuance or termination of the Plan shall not accelerate the obligation to make payments to any person not otherwise currently entitled to payments under the Plan, unless otherwise specifically so determined by the Company and permitted by applicable law, relieve the Company of its obligations to make payments to any person then entitled to payments under the Plan, or reduce any existing Account balance. ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1 Employment Relationship. A Participant shall be considered to be in the employ of the Company and its related affiliates and subsidiaries as long as he remains an employee of either the Company, any subsidiary corporation of the Company, or any corporation to which substantially all of the assets and business of the Company are transferred. For this purpose, a subsidiary corporation of the Company is any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, as of the date such determination is to be made, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Nothing in the adoption of the Plan nor the crediting of deferred compensation shall confer on any Participant the right to continued employment by the Company or an affiliate or subsidiary corporation of the Company, or affect in any way the right of the Company or such affiliate or subsidiary to terminate his employment at any time. Any question as to whether and when there has been a termination of a Participant's employment, and the cause of such termination, shall be determined by the Administrative Committee, and its determination shall be final. 16 8.2 Facility of Payments. Whenever, in the opinion of the Administrative Committee, a person entitled to receive any payment, or installment thereof, is under a legal disability or is unable to manage his financial affairs, the Administrative Committee shall have the discretionary authority to direct payments to such person's legal representative or to a relative or friend of such person for his benefit; alternatively, the Administrative Committee may in its discretion apply the payment for the benefit of such person in such manner as the Administrative Committee deems advisable. Any such payment or application of benefits made in good faith in accordance with the provisions of this Section shall be a complete discharge of any liability of the Administrative Committee with respect to such payment or application of benefits. 8.3 Funding. All benefits under the Plan are unfunded and the Company shall not be required to establish any special or separate fund or to make any other segregation of assets in order to assure the payment of any amounts under the Plan; provided, however, that in order to provide a source of payment for its obligations under the Plan, the Company may establish a trust fund. The right of a Participant or his Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his Beneficiary shall have any rights in or against any amounts credited under the Plan or any other specific assets of the Company. All amounts credited under the Plan to the benefit of a Participant shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. 8.4 Anti-Assignment. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge; and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit shall be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If a Participant, a Participant's spouse, or any Beneficiary should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right to benefits under the Plan, then those rights, in the discretion of the Administrative Committee, shall cease. In this case, the Administrative Committee may hold or apply the benefits at issue or any part thereof for the benefit of the Participant, the Participant's spouse, or Beneficiary in such manner as the Administrative Committee may deem proper. 8.5 Unclaimed Interests. If the Administrative Committee shall at any time be unable to make distribution or payment of benefits hereunder to a Participant or any Beneficiary of a Participant by reason of the fact that his whereabouts is unknown, the Administrative Committee shall so certify, and thereafter the Administrative Committee shall make a reasonable attempt to locate such missing person. If such person continues missing for a period of three (3) years following such certification, the interest of such Participant in the Plan shall, in the discretion of the Administrative Committee, be distributed to the Beneficiary of such missing person. 8.6 References to Code, Statutes and Regulations. Any and all references in the Plan to any provision of the Code, ERISA, or any other statute, law, regulation, ruling or order shall be deemed to refer also to any successor statute, law, regulation, ruling or order. 8.7 Liability. The Company, and its directors, officers and employees, shall be free from liability, joint or several, for personal acts, omissions, and conduct, and for the acts, omissions and conduct of duly constituted agents, in the administration of the Plan, except to the 17 extent that the effects and consequences of such personal acts, omissions or conduct shall result from willful misconduct. However, this Section shall not operate to relieve any of the aforementioned from any responsibility or liability for any responsibility, obligation, or duty that may arise under ERISA. 8.8 Tax Consequences of Compensation Reductions. The income tax consequences to Participants of Compensation reductions under the Plan shall be determined under applicable federal, state and local tax law and regulation. 8.9 Company as Agent for Related Employers. Each corporation which shall become a participating employer pursuant to Section 2.5 by so doing shall be deemed to have appointed the Company its agent to exercise on its behalf all of the powers and authority hereby conferred upon the Company by the terms of the Plan, including but not limited to the power to amend and terminate the Plan. The Company's authority shall continue unless and until the related employer terminates its participation in the Plan. 8.10 Governing Law; Severability. The Plan shall be construed according to the laws of the State of Ohio, including choice of law provisions, and all provisions hereof shall be administered according to the laws of that State, except to the extent preempted by federal law. A final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. In the event that any one or more of the provisions of the Plan shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of the Plan, but the Plan shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein, and there shall be deemed substituted such other provision as will most nearly accomplish the intent of the parties to the extent permitted by applicable law. 8.11 Taxes. The Company shall be entitled to withhold any taxes from any distribution hereunder or from other compensation then payable, as it believes necessary, appropriate, or required under relevant law. 18 EX-99.01 4 l10986aexv99w01.txt EXHIBIT 99.01 Exhibit 99.01 [Cardinal Health Logo] 7000 Cardinal Place Dublin, OH 43017 www.cardinal.com FOR IMMEDIATE RELEASE CONTACTS: Media: Jim Mazzola Investors: Jim Hinrichs (614) 757-3690 (614) 757-7828 jim.mazzola@cardinal.com jim.hinrichs@cardinal.com CARDINAL HEALTH ANNOUNCES GLOBAL RESTRUCTURING PLAN TO ACCELERATE GROWTH BOARD OF DIRECTORS AUTHORIZES $500 MILLION SHARE REPURCHASE DUBLIN, OHIO, DEC. 13, 2004 -- Cardinal Health, Inc. (NYSE: CAH), the leading provider of products and services supporting the health care industry, today announced details of a previously disclosed three-year restructuring plan expected to improve annual operating earnings by $500 million. The company also announced that its board of directors has authorized the purchase up to $500 million of its common shares as management deems appropriate. "We are bringing the company together by integrating externally to align our businesses for customers and internally to become even more efficient," said Robert D. Walter, chairman and chief executive officer of Cardinal Health. "Both actions - integrating externally and integrating internally -- will help us deliver even more value to customers and improve returns to shareholders." The restructuring supports "One Cardinal Health," a long-term program launched by the company to increase the value it provides customers through better integration of existing businesses and improved efficiency from a more disciplined approach to procurement and resource allocation. The restructuring will be implemented in two phases over a three-year period, the company said. PHASE ONE OF RESTRUCTURING PLAN The cost to execute the first phase of restructuring is estimated to be $300 million to $350 million, for asset impairment, employee severance and other costs. Cost savings and profit improvements from this phase are expected to add $125 million to operating earnings in fiscal 2005 and reach an annualized amount of $200 million for fiscal 2006. -more- CARDINAL HEALTH ANNOUNCES GLOBAL RESTRUCTURING PLAN TO ACCELERATE GROWTH PAGE 2 The company expects to reduce its 58,000 global workforce by 4,200 during this phase, primarily through business consolidations and process improvements, resulting in the closing of approximately 25 facilities worldwide. More than 100 profit-improvement actions underway include rationalizing and discontinuing overlapping or underperforming product lines and improving product pricing. PHASE TWO OF RESTRUCTURING PLAN The second phase of the restructuring will focus on longer term integration to drive top line growth and create greater productivity, including: o Company-wide, world-class shared services for administrative functions such as finance, human resources and information technology. o Strategic sourcing to better leverage Cardinal Health's global scale and purchasing power. o An integrated go-to-market strategy for the company's hospital and pharmaceutical manufacturer customers. o Efficiency and quality improvement plans across Cardinal Health's manufacturing and logistics operations. Through specific projects already identified, the company expects the financial benefit of phase two to be $250 million to $350 million in annual operating earnings improvements. The cost to implement phase two has not been finalized and will be announced at a future date following approval by the board of directors. "Through the 'One Cardinal Health' program we are focused on building lasting discipline into our operations, making the company more agile and driving organic growth well into the future," said George L. Fotiades, president and chief operating officer of Cardinal Health. FISCAL 2005 FINANCIAL IMPACT AND OUTLOOK Of the phase one restructuring costs, the company expects approximately $230 million to $270 million will be recognized as special items in the quarters in which the costs are incurred. Approximately $70 million to $80 million of the costs to write down impaired assets will be recognized as non-recurring operating expenses. Of this amount, approximately $53 million will be incurred during the second quarter, reducing operating results for the period. The company now expects earnings per share for the first half of fiscal 2005 to decline approximately 15 percent, excluding special items and non-recurring charges. Non-recurring charges primarily relate to $53 million for the impaired assets announced today. The company continues to forecast a much stronger second half for the fiscal year, with full-year earnings-per-share growth in the low single digits, excluding special items and non-recurring charges. Achievement of this growth is dependent on benefits of the restructuring program and operational progress, most notably in the pharmaceutical distribution business. These new expectations are below the company's previously stated goal of at least 10 percent earnings-per-share growth for fiscal 2005. -more- CARDINAL HEALTH ANNOUNCES GLOBAL RESTRUCTURING PLAN TO ACCELERATE GROWTH PAGE 3 SHARE REPURCHASE PROGRAM Historically, Cardinal Health has used its strong cash flow to finance growth and working capital, while returning excess cash to shareholders in the form of dividends and share repurchases. The $500 million share-repurchase program reflects that commitment and will be funded from normal cash flow, the company said. Over the past three years, Cardinal Health has repurchased $3 billion of its shares. The company expects to begin repurchasing shares in the third quarter of fiscal 2005. CONFERENCE CALL Cardinal Health has scheduled a conference call for investors today at 11:30 a.m. Eastern Standard Time (EST) to discuss its updated outlook. To access this discussion via the Internet, go to the Investor Relations page at www.cardinalhealth.com. The company has also established a telephone call-in line at (706) 634-5100, conference ID 2852907. An audio replay of the conference call will be available until 11 p.m. EST on Dec. 15 by dialing (706) 645-9291, passcode 2852907. A transcript and replay of the Webcast will be available at the Investor Relations page on www.cardinalhealth.com. ABOUT CARDINAL HEALTH CARDINAL HEALTH, INC. (www.cardinalhealth.com) is the leading provider of products and services supporting the health care industry. Cardinal Health develops, manufactures, packages and markets products for patient care; develops drug-delivery technologies; distributes pharmaceuticals and medical, surgical and laboratory supplies; and offers consulting and other services that improve quality and efficiency in health care. Headquartered in Dublin, Ohio, Cardinal Health employs more than 55,000 people on six continents and produces annual revenues of more than $65 billion. Cardinal Health is ranked No.17 on the current Fortune 500 list and named one of the best U.S. companies by Forbes magazine for 2004. ### Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Cardinal Health's Form 10-K, Form 8-K and Form 10-Q reports (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the costs, difficulties, and uncertainties related to the integration of acquired businesses, the loss of one or more key customer or supplier relationships or changes to the terms of those relationships, changes in the distribution patterns or reimbursement rates for health-care products and/or services, the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal and administrative proceedings, the effects, timing or success of restructuring programs or plans, the impact of previously announced restatements, and general economic and market conditions. Cardinal Health undertakes no obligation to update or revise any forward-looking statement. -----END PRIVACY-ENHANCED MESSAGE-----